Weathering the storm

Lloyd Maddock, CEO of Ahlibank, shares his views on what 2017 holds in store for Oman’s banking sector. An OER interview

lloyd-maddockCan you share your thoughts on the macro-economic situation and what in your opinion will be the big trends of 2017 in Oman and globally?

The year 2016 has been a challenging and difficult year for Oman as well as the global economy. Oman has been feeling the challenges of low oil prices, however it is heartening to note that the government has been carrying out policy measures to accelerate economic diversification and to enhance non-oil revenues. It cannot be denied that low oil prices affected the economic landscape but we feel that there is substantial progress being made regarding economic divergence in Oman. The Sultanate has the potential and opportunities across different sectors. With diversification efforts focused on sectors such as tourism, logistics, manufacturing, petrochemicals and mining, we are confident Oman will overcome the tough times. As for 2017, we feel these sectors will perform with Oman’s strong government willing to implement far-reaching reforms. Policy strategies that clearly combine macroeconomic and structural efforts in a common framework are needed to navigate through this low rate of global economic growth.

What is Ahlibank’s outlook for 2017?

We expect 2017 to be very similar to 2016. Liquidity pressures seem unlikely to dissipate in the short term, despite the recent increase in oil prices, so liquidity and cash flow management remain key factors for businesses to manage through.

According to you, how is Oman’s banking sector going to shape up in 2017?

The sector retains comfortable capital adequacy, and although additional levels of provisioning may be expected to continue into 2017, I fully expect that the sector will be well positioned to support the economy, as usual. The capital markets can be expected to play an increasing role in areas such as IPOs, corporate debt issuance and M&A.

The Central Bank of Oman had announced in June 2016 that despite the challenges facing the economy, the banking sector has remained resilient supporting economic diversification initiatives and credit needs. The fourth edition of the Financial Stability Report (FSR) 2016 released in July indicated that despite the sharp and sustained decline in oil prices since mid-2014, the economy of Oman fared well. This was attributed to the fact the country had proactively kept high fiscal buffers, higher capital requirements for banks, low government debt, and flexible wage contracts. In November 2016, Moody’s Investors Service had also revised its outlook for Oman’s banking system to stable from negative. The stable outlook echoes Moody’s expectation that “Omani banks’ credit profiles will remain broadly stable over the outlook horizon, as increased government borrowing and higher hydrocarbon output will support a level of public spending that will help stabilise the softened economy, following a prolonged period of decline in oil prices”. We feel positive that banking sector will continue to perform well.

Can you share a few highlights of the year 2016 for the bank?

There are a number of key financial metrics that we strive to achieve every year, and I am pleased to note that in 2016 these were achieved again, despite the challenging economic situation. We deliberately moderated balance sheet growth, while surpassing the bottom line target. It was a year in which we have finalised upon a new medium strategy, and we look forward to implementing this starting in 2017.

What were the main challenges? And what were the factors that helped the bank do well?

I think the challenges for banks and the wider economy are well documented! But for ahlibank, balance sheet management was more important, which enabled us to maintain full support to our valued clients, in difficult times.

What are the new areas that Ahlibank plans to foray into in 2017?

As mentioned, we are to embark upon a new medium term strategy starting in 2017, so I will be pleased to elaborate further, during the first quarter.



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